Friday, October 12, 2012

Demerger was not a winning formula at Courtaulds but Cellulosics might be (1996)

Support for our view that cellulosics should have a great long-term future if they survive the medium-term, but more confusion: this article seems to put SL3 in Asia.

Cutting away its currently troubled textiles arm in 1990 has not saved the chemicals rump of the business from a vicious business cycle. 

But the real story at Courtaulds remains a long-term one. The Far East consistently notches up profits growth of 15 per cent as the group continues its drive into the region, with businesses like marine and powder coatings and toothpaste tubes all building new facilities there. Next year they will be joined by the third production plant for Courtaulds' Tencel "wonder fibre", now showing its first profits after a decade of development costing around £300m.

The £150m plant will keep capital spending up at around £200m a year for some time, but Tencel will be making at least £60m by the beginning of the new millennium, which is roughly the profits on viscose Courtaulds has lost since the early 1990s, according to analysts' estimates. If viscose is back by then too, 10 per cent margins may become a reality again.

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